Amazon Falls 7% After Hours Despite 39.3% AWS Growth as Spending Concerns Mount
Key Facts
Amazon shares fell as much as 7% in after-hours trading on October 29, as concerns about cash burn and heavy investment in artificial intelligence overshadowed growth in its cloud computing business. The company had closed regular trading at $243.79 a share, according to EL7 data. The reaction followed the results, with investors focusing on how much money Amazon is directing to AI infrastructure. By contrast, third-quarter results showed strong growth in its web services unit, but that performance did not ease market concerns about the impact of spending on cash flow. The share decline coincided with losses in other technology stocks as investors reassessed returns on massive AI investments.
Sales at Amazon’s cloud services unit rose to $46 billion in the third quarter ended September 30, up 39.3% from the year-earlier period, according to the Associated Press. The agency said this was the unit’s fastest growth rate in nearly five years, reflecting strong momentum in a business that has become central to the company’s AI expansion. Still, investors focused on the cost of providing the computing capacity and data centers needed to meet demand. The agency said their concerns centered on Amazon’s cash burn as it continued to invest heavily in the area. As a result, AWS growth alone was not enough to ease concerns about a widening gap between current spending and the cash returns shareholders are waiting for.
Chief Executive Andy Jassy kept Amazon’s capital spending outlook at $220 billion for the year and told investors that most of the amount would go toward building data centers for AI. The figure offers a measure of the resources the company is committing to expand its infrastructure as investors watch the effect on available cash. Jassy described the pace of chip installation as accelerating, saying Amazon was installing an AI chip about every 14 seconds. The expansion puts the company at the center of the race for computing capacity, but heightens scrutiny over whether the large investments will translate into returns for shareholders. Pepperstone analyst Chris Weston said investors were increasingly asking whether shareholders would earn an adequate return on the huge capital being directed toward building AI infrastructure.
Pressure spread to broader technology stocks as concerns about AI spending mounted. Nasdaq 100 futures fell 1.9% in a Reuters report published on October 30, alongside declines in technology stocks in Asia. Reuters linked the move to Amazon’s 7% after-hours share drop and a 23% decline in Intel shares in subsequent trading. Alphabet shares also fell 12.6% in the October 29 Wall Street session, wiping out about $500 billion in market value, according to the report. It said rising AI spending and the resulting pressure on cash flow were at the heart of investor concerns.
Fourth-quarter guidance is another focus in assessing the results: Amazon expects sales of between $240 billion and $247 billion, while the average analyst estimate was $244.16 billion, according to the Associated Press. Analysts had expected third-quarter earnings per share of $1.97 and sales of $202.2 billion, according to estimates cited by the agency. The outlook places the next quarter’s sales range near the market estimate, while attention remains on capital spending and the company’s ability to turn investment into cash. Strong AWS growth, which posted its fastest pace in nearly five years, remains a support for the results. But the share decline after the announcement shows investors are weighing that growth against the cost of building data centers and accelerating AI chip deployment.